Exclusivity and Control in Content Deals

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An excellent (though academic) paper by Andrei Hagiu, an assistant professor at Harvard Business School about the various models involved in content distribution deals, and the industry’s propensity for exclusive deals. The paper then presents a model of distribution platform competition, and how that would help content companies.

Some points raised in the paper:
— The key is control rights over factors such as content pricing and cash flow. Strategic interactions around control rights between platforms and the content provider can push the industry structure in either direction.
— High-quality content will multihome (meaning multiple-platforms), because foreclosing a portion of the market by being exclusive will be too costly. Mid-quality content will be exclusive and can soften price competition at the platform level enough to offset the losses from excluding a portion of the market. Low-quality content will multihome, since it would not yield any comparative advantage if it were exclusive.
— A platform that has exclusive rights to content may prefer to relinquish control over pricing and associated revenues to the content provider in order to relax price competition with a rival platform.

The working paper can be downloaded here. A summary is here.

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